Subsidized Jobs: A Faint Echo of the New Deal

In rural Winston County, Mississippi, Taylor Machine Works — best known for its Big Red forklifts — is the primary employer. After the recession hit in late 2008, the company shed nearly 200 of its 500 jobs and would not be rehiring anyone now if it weren’t for a subsidized employment program Mississippi launched with the help of federal stimulus money.

Nationwide, 32 states are tapping into a $5 billion emergency fund under the Temporary Assistance for Needy Families (TANF) welfare-to-work program — to help small businesses, nonprofits and public hospitals hire and train unemployed workers at a time when few organizations are ready to take on the added cost.

This is not exactly the Works Progress Administration. During the Great Depression, the federal government subsidized employment for more than 8.5 million jobless workers under the WPA. Although maligned for its massive cost and the fact that millions of workers were collecting paychecks directly from the federal government, others credited the New Deal jobs program with returning dignity and hope to millions of American families.

The new welfare-to-work program is not encountering the level of criticism about “subsidized welfare” that the WPA met from virtually every place on the conservative spectrum. The conservative American Enterprise Institute supports the current approach. So do local business organizations, and most importantly in Mississippi, so does Republican Governor Haley Barbour, who was an opponent of the overall stimulus package itself.

The current TANF program has subsidized only 185,000 jobs so far. But in its own limited way, it is stimulating local economies, boosting small businesses and providing opportunities for low-income workers to leave welfare and unemployment to support their families with a paycheck.

With broad authority to tailor their own programs, most states took more than a year after the Recovery Act was signed in February 2009 to develop eligibility standards and forge relationships with businesses that would ensure low-income workers got the training and experience they needed to launch permanent jobs after the subsidies ended.

But now, as Congress considers additional funding and an extension of the program’s September 30 deadline, thousands of businesses are gearing up to hire and train new workers.

So far, Taylor Machine Works has hired back eight of its former workers and plans to hire as many as 17 more under the program known as Mississippi STEPS. Among the new hires, single parent Robert Strickland returned to Taylor last February, 10 months after he was laid off. A skilled welder, Strickland had gotten by on an unemployment check, Food Stamps and Medicaid for his 16-year-old daughter. But he says he was looking at the prospect of pulling her out of high school and leaving the county to find a job if Mississippi STEPS hadn’t come along.

In Illinois, a program launched in April already has created more than 10,000 jobs and is adding new jobs at a rate of 500 per day. Called “Put Illinois to Work,” the program is expected to spend its entire stimulus allocation of nearly $200 million, plus $10 million in additional state money, by September 30.

But not all states will be able to spend their full allocation, and 18 have yet to launch a program at all. As of June, states had spent $581 million in stimulus dollars on subsidized employment, up from $200 million in mid-May, according to the U.S. Department of Health and Human Services.

Out of the $5 billion total allocation under the emergency TANF fund, states have drawn down $2.7 billion, mostly for cash assistance. Now that subsidized employment programs are up and running, however, federal officials expect a majority of the funding will go for job creation and only a few states will leave stimulus money on the table.

Still, whether states can spend their full allocation by the deadline or not, state and county officials say they will have to shut down the successful programs without more federal money because of competing needs for limited welfare dollars.

In Los Angeles County, for example, a program that has created more than 8,000 new jobs is scheduled to close its doors June 30 if Congress fails to expand the program.

Statehouse support

Mississippi STEPS, a collaboration between the state Departments of Human Services and Employment Security, provides jobs for unemployed workers with at least one child and an income below 250 percent of the federal poverty measure — $55,125 for a family of four. Eligible employers include public hospitals, nonprofit organizations and private businesses, with a preference for small businesses.

Here’s how the program works: Employers sign a contract agreeing to take on a certain number of employees — not to exceed 50 percent of their workforce — and committing to train and supervise these workers with an eye to hiring them permanently when the subsidy ends.

Participating companies are reimbursed monthly for workers’ wages, starting with 100 percent reimbursement in the first two months, then stepping down to 75 percent, 50 percent and 25 percent by the end of the sixth-month subsidy period.

Launched in December 2009, Mississippi STEPS was among the first programs of its kind, due in part to strong support from Governor Barbour, who personally promoted the effort throughout the state in TV and radio commercials. The employment subsidy program, Barbour said, “will provide much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities.”

State programs vary widely in the number of workers they serve, the level of subsidies, the types of businesses they target and the structure of the program. Washington State, for example, focuses on nonprofit employers, while New York gives preference to health care and green-energy jobs. Mississippi’s program is led by its workforce development agency, while Hawaii contracts with the nonprofit job training organization Goodwill Industries. 

Mississippi STEPS has been so successful that Barbour earlier this month announced two spin-offs: Summer STEPS for temporary youth jobs and STEPS New Start, which will provide $5,000 grants for qualified participants who commit to starting a new business within 60 days of receiving the grant.

So far, Mississippi has funded more than 1,400 jobs across the state and aims to create at least 3,100 more, paying an average wage of $8.68 per hour. State officials expect to spend $30 million of the state’s $43 million stimulus allocation and have committed another $10 million for Summer STEPS. Now in full swing, the program is adding about 150 new jobs per week.